Modest Rudd reply targets trades, small business

Labor leader Kevin Rudd announced carefully targeted measures designed to solve the skills crisis in trades and make life easier for SMEs in his budget reply last night. But he is unlikely to win over business groups unless he changes his position on industrial relations.

Rudd adopted a low-key tone in the speech, continually reinforcing Labor’s commitment to “modest” and “practical” measures and conservative fiscal policy. There was not attempt to match Tuesday night’s big spending budget, Labor’s $3 billion in commitments paling in comparison to the Coalition’s $70 billion-plus.

The measures

Skills training: A $2.5 billion package to improve trade training facilities in secondary schools was the biggest carrot offered to voters in what was a modest budget reply containing just over $3 billion worth of new announcements.

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Late payments: Labor would allow small businesses to charge interest on any federal government bills left unpaid after 30 days. “Small businesses often waste time badgering government for payment, taking them away from their business. That will now change,” Rudd said.

Red tape: A Rudd government would also establish a superannuation clearing house to reduce red tape for SMEs compelled to make employee super payments to a variety of different funds under choice-of-fund laws.

SMEs would simply be required to forward employees’ super contributions to the clearing house in order to discharge their legal obligation. The clearing house would then distribute the payments to employees’ selected super funds.

The reaction

Business groups this morning cautiously welcomed Rudd’s proposals but said they were overshadowed by ongoing doubts about Labor’s position on industrial relations.

Master Builders Association chief executive Wilhelm Harnisch welcomed the proposal for capital works for trade facilities. He says more training in trade skills is part of the answer for addressing the skills shortage facing many builders.

National Retail Association chief executive Patrick McKendry says, while welcome, Rudd’s announcements on superannuation and faster payment by government departments was no more than a “good start”.

“The new measures are welcome, but we’ll need to see a lot more as the election year unfolds,” McKendry says. “But we can’t let him off the hook on IR. It really is the central issue for SMEs.”

McKendry says it is unlikely the 30 day credit requirement for government departments will mean much for most SMEs. “If you have the government as a debtor then this is good one, but the reality is that only a very limited number of SMEs fall into that category.”

Council of Small Business Organisations of Australia chief executive Tony Steven says small business owners will commend Labor as much for Rudd’s commitment to “economic conservatism” as for the superannuation and 30 day credit announcements.

“In the end, by far the most important aspect for small businesses is that the economy remains strong and we don’t see any interest rate rises,” Stevens says.

– Mike Preston

Resources, housing drive WA budget bonanza

Stamp duty concessions for first home buyers and $5.8 billion for new infrastructure are the centrepieces of a big spending West Australian budget brought down by state Treasurer Eric Ripper last night.

First home buyers will now be exempt from stamp duty if they buy a home valued at up $500,000, double the previous threshold. The change will save first home buyers $20,700 on a $500,000 house at a cost of $270 million per year to the WA treasury coffers.

The budget also included an increase in the land tax exemption threshold from $100,000 to $250,000 and cuts in stamp duty on mid-priced motor vehicles.

But infrastructure will receive the biggest boost, with the $5.8 billion allocated for 2007-2008 just part of a $21.6 billion four-year spending plan. The bulk of the money to be spend next year will go to upgrading electricity and water infrastructure, roads and capital spending on hospitals.

Even with these big spending measures, Ripper was able to maintain a $1.85 billion operating budget surplus, thanks largely to a record $17.6 billion in revenue received over the 2006-2007 year.

Missing from the budget were significant tax concessions for West Australian business. WA Chamber of Commerce and Industry chief executive John Langoulant lambasted the budget, telling The West Australian that “most of the measures in the budget are unimaginative and pretty pedestrian” and “don’t provide any real reduction in revenue to the Government and don’t address any real concerns of business”.

Economic growth in the WA economy is forecast to slow from 6% in 2006-2007 to 4.5% in 2007-2008. The budget surplus is expected to fall to $1.45 billion in 2007-2008 despite an expected 12.8% increase in mining royalties.

– Mike Preston

The detail on WorkChoices changes starts to emerge

Employers could be liable for back pay if they submit new workplace agreements that flunk the new “fairness” test imposed by the changes to WorkChoices announced last week.

But employers still haven’t been told precisely what the new fairness test entails.

Workplace Relations Minister Joe Hockey, said yesterday that the test would be very similar to the old “no disadvantage test”, which was scrapped by WorkChoices last year. Hockey says the laws to establish the test are being drafted now and will be introduced to Parliament before the end of May.

See Peter Vitale’s Legal Update for what the new changes mean for SMEs.

– Jacqui Walker

Broadband

Thankfully there is a lot of surplus money sloshing around federal coffers because the Federal Government must come out with a solution to our broadband fiasco before the next election. One reason is that the voices attacking the Government over its lack of action on broadband are growing.

CEO at Fairfax Media, David Kirk, speaking at the Press Council’s annual address, is just the latest business leader to lash out, saying the ultra-slow pace of deployment of true broadband in regional and rural Australia was undercutting (Fairfax’s) growth.

He called for everyone to have access to broadband speeds that met their needs and for broadband pricing to be appropriate.

Last weekend, commentator Bob Gottliebsen also attacked John Howard over his lack of understanding of web 2.0’s potential, saying that Labor had cottoned on to web 2.0. He interviewed Cisco’s chief executive John Chambers, who described web 2.0 as a high-speed, high definition transfer of visual images that enables virtual personal contact to go close to duplicating person-to-person contact.

Chambers told Gottliebsen that internet one was about a person to a machine. Web 2.0 is about the power of the human network, and will change everything from your innovation models to your supply chain. (Chambers has already written into the Cisco budget a $US150 million reduction in transport costs as executives will no longer need to fly to meetings.)

Web 2.0 provides fantastic opportunities for SMEs from excellent sales and marketing presentations via large plasma screens and video to shortening supply chains and networking opportunities. But while countries in Asia are leading the way, Australia is lagging with its second rate broadband.

The Australian banking sector may come to regret its recent relaxation of lending standards, according to accounting group PricewaterhouseCoopers. Its data show that the value of bad debts rose 23% in the first half of 2006-07 reports The Australian newspaper.

But low unemployment, and coming off a very moderate base, distressed assets remain at comfortable levels so far. Profits for the banks are up, by around 10% and more in the half, and the respective wealth management divisions of the major banks are making strong contributions to earnings.

– Jacqui Walker

Economy round-up

The average price of a vacant block of land in Australia’s state capitals was $183,873 in the December 2006 quarter, 7.7% up on the same quarter in 2005, according to the Housing Industry Association – Australian Property Monitors Land Monitor released today.

Land constitutes 63% of the cost of a house and land package in Perth, the most expensive in the country. Sydney is close behind on 57%, while Hobart is at other end of the spectrum, land makes up just 33% of the average cost of a house and land package in the city.

Although land prices declined 0.2% from the September 2006 quarter, they remain at near historic highs, the report says.

The S&P/ASX 200 has dropped big 0.9% to 12.40 am today, down 60.1 points to 6296.4. At the same time the Australian dollar is trading at US82.84c, down on yesterday’s closing price of US83.27c.

– Mike Preston

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